Baxter International, Inc. v. Abbott Laboratories

Baxter International, Inc. (Baxter) (defendant) invented the anesthetic gas sevoflurane in the 1960s and obtained two patents, but Baxter elected not to spend money on the testing required before sevoflurane could be sold in the United States. Maruishi Pharmaceutical Company (Maruishi) received an exclusive sublicense from Baxter in 1988 to make and sell sevoflurane under the Baxter patents in Japan. Sevoflurane became popular, so Abbott Laboratories (Abbott) (plaintiff) received a sublicense from Maruishi in 1992, and sevoflurane was subsequently approved for sale in the United States. Based on the grant of this sublicense, Abbott became a party to the agreement between Baxter and Maruishi, which contained an arbitration provision. Maruishi produced the sevoflurane, sold it to Abbott for resale, and paid Baxter a royalty. Eventually, Ohio Medical Associates (Ohmeda) invented a new method to produce sevoflurane, so that it competed with Abbott. Baxter purchased Ohmeda and continued with Ohmeda’s plan to compete with Abbott by producing sevoflurane and introducing it into the American market. Abbott initiated arbitration proceedings pursuant to both the 1992 agreement and the New York Convention (the convention), arguing that the Baxter patents had not yet expired and that Baxter’s sale of the Ohmeda-process sevoflurane violated the exclusivity terms of the licensing agreement. Baxter argued that the licensing agreement only prohibited Baxter from issuing additional licenses and that if the license forbade Baxter from competing, it violated antitrust law, including § 1 of the Sherman Act. The arbitral panel explicitly considered these arguments but ultimately ruled against Baxter on both points and issued an award. A federal district court judge ordered Baxter to comply with the arbitration award. Baxter appealed, arguing that the arbitrators’ decision commanded conduct that would result in an unlawful monopoly.